In this podcast, Jonathan and Rory talk about the 8th wonder of the world, Compound Interest.
This is a term a lot of people are familiar with but not many are able to use it to their benefit. At the beginning of the podcast, Rory tells us a story of friend who had money saved away for years which grew exponentially but one day decided it was enough and wanted to buy a car. If they had waited another 15 years the money wouldn’t have doubled to buy 2 cars, but instead would have been over half a million!
Jonathan then explains how compound interest and the power of it can be used in trading. He Explains that by having a small account and achieving just 2% each week that the numbers will compound weekly. In less than a decade you could be trading with more than half a million, starting with as little as €5000.
The blokes explain that Compound interest usually “doesn’t work” until the later stages as 10% of 1 isn’t much but when it’s 10% of 1 million, that’s when people think “it works” the gains have stayed constant, but the variable change is only in the nominal amount.
The most important lesson to learn from compound interest is to stay consistent and not chase losses. Consistency will get you further than taking unnecessary risks and focusing on the short term. Jonathan also explains that too many traders focus on the short-term goals and not the long-term goals.
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